8 Reasons to Speak With a Lender Long Before Buying a Home

Published December 20, 2018

You might not be entirely ready to start shopping for a home just yet, but that doesn’t mean it’s too early to speak with a mortgage lender. If buying a home is on the horizon at some point in the near future, there’s no reason why you shouldn’t have a chat with a lender to get yourself prepared for when the time comes.

Here are just a handful of reasons why it might be a good idea to talk to a lender before the house hunting process begins.

1. To Help You Make Sense of Your Credit Report

Your lender will want to pull a copy of your credit report to see what your credit history is like. This is a critical step in the loan application and approval process. If you haven’t pulled a copy for yourself, you might be completely unaware of all the information that might be contained in the report.

Your lender will be able to assess your credit report and inform you of the positive things that are strengthing your credit versus the things that might be pulling your credit score down. The lender may then make some suggestions about what to do as far as which debts are having the biggest negative impact on your borrowing power so you can make some effort to pay them down before applying for a mortgage.

2. To Review Your Income

Your lender will go over all the documentation surrounding your income, including your recent pay stubs and tax returns. If you’re self-employed, you’ll need to supply addition paperwork to prove your income and ensure you have a steady stream of funds coming in to support your mortgage payments.

Your lender will then provide you with some advice in terms of what you have to do to qualify for a home loan and can help you come up with a payment strategy. If your income isn’t yet up to par, your lender can provide you with some guidance as far as what you can do to improve your financial profile in order to secure a mortgage.

3. To Get a Head Start on the Mortgage Application Process

The mortgage application process can be a bit tedious. There’s a ton of paperwork for you to fill out and lots of documentation to submit. This can take a bit of time and effort to complete. By visiting a lender long before you start the house hunting process, you can get a head start on the process and be left with less to do after you find a home that you want to put an offer on.

4. To Find the Lowest Interest Rate and Best Terms

Not only can you speak with one lender, but you can also can chat with a few of them in order to help you compare different loan products to see which one is best for you. Shopping around with different lenders will allow you to find a mortgage product with the lowest rate and better terms, which can help you save a ton of money over the life of the loan and make payments more convenient for you.

Alternatively, you can work with a mortgage broker who will be able to do all the shopping around for you to find the best mortgage at the lowest rate.

5. To Get Pre-Approved For a Mortgage

Consider getting pre-approved for a mortgage before shopping for a home. A mortgage pre-approval letter is a big step in the process of securing a mortgage because the lender actually checks your credit and verifies your financial data. With a pre-approval letter in hand, you’ll have a commitment from your lender to loan you a certain amount of money towards the purchase of a home, albeit with certain conditions.

It should be noted that a pre-approval will not guarantee final loan approval. The actual home itself plays a role in the approval process, and situations may arise after pre-approval that could change things. Further, pre-approvals are only usually valid up to 90 days, which means if you wait 120 days to buy a home, your pre-approval letter may no longer be valid and the process will require additional work.

6. To Find Out How Much You Can Afford

Going over your financials with a lender will give you a much better idea of exactly how much you can afford in a home purchase. You might have some idea based on your income and debts, but a lender can provide you with a much more accurate picture. Knowing exactly how much you can afford will help you and your real estate agent focus only on properties that are priced within your budget rather than wasting time looking at homes are out of your reach.

7. To Impress Sellers

Sellers usually only want to work with buyers who have proven to be qualified to make a home purchase. There’s always a risk for sellers to enter into an agreement with a buyer who has yet to speak with a lender and get pre-approved for a home loan.

By going into an offer negotiation prepared with a pre-approval letter in hand, you’ll be looked more favorably upon by the sellers.

8. To Go Over Closing Costs

Not only is there a mortgage to pay when buying a home, but there are also a number of closing costs to deal with. Your lender will be able to help you understand all the costs associated with buying a home so you can go into the process well prepared. In addition to the down payment, closing costs can include:

Mortgage insurance

Title insurance

Credit report fees

Application fees

Appraisal fees

Generally speaking, buyers tend to pay anywhere between 2% to 5% of the purchase price of a home in closing costs.

The Bottom Line

If you’re planning to buy a home at some point but aren’t necessarily ready just yet, it still might be worth your while to visit a mortgage lender. There are plenty of things that you can learn and ways that you can prep for the application and approval process. If anything, starting the process early can help you get your credit score and finances to where they need to be to improve your chances of mortgage approval when the time comes.